Press release of RBI on consultative Document on Regulation of Microfinance (press release dated -14.06.2021) – RBI

  • 15th, June 2021
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Press release of RBI on consultative Document on Regulation of Microfinance (press release dated -14.06.2021) – RBI

  • The suggested framework in the Consultative Document is intended to be made applicable to the microfinance loans provided by all entities regulated by the Reserve Bank and is aimed at protecting the microfinance borrowers from over-indebtedness as well as enabling competitive forces to bring down the interest rates by empowering the borrowers to make an informed decision. The key proposals of the Consultative Document are enumerated below:
  • A common definition of microfinance loans for all regulated entities.
  • Capping the outflow on account of repayment of loan obligations of a household to a percentage of the household income.
  • A Board approved policy for household income assessment.
  • No pre-payment penalty; no requirement of collateral; and greater flexibility of repayment frequency for all microfinance loans.
  • Alignment of pricing guidelines for NBFC-MFIs with guidelines for NBFCs.
  • Introduction of a standard simplified fact sheet on pricing of microfinance loans for better transparency.
  • Display of minimum, maximum and average interest rates charged on microfinance loans on the websites of regulated entities.

 

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